Strong revenue momentum, but margin compression signals execution risk

Delivered ₹731.3 Cr vs ₹502 Cr Q2 FY26 = 45.7% growth

EBITDA growth of 11% is far below revenue growth of 45.7%, signals margin compression

Delivered ₹10.5 Cr (₹7.1 Cr prior year) = 48% growth; but NPM only 1.4%, extremely thin

Specific breakdown provided; capacity 2000 tons/month, currently at 25% utilization

Delivered OPM 3.0% but EBITDA margin not disclosed; machine sale loss of ₹2 Cr depressed Q2

Target stated; but currently 25% capacity utilization and ₹2 Cr loss on prior equipment disposal raises execution risk

Order book grew to ₹76.5 Cr (₹50.8 Cr PEB, ₹25.7 Cr railway RDSO-approved units). Railway demand described as 'immense' and 'lot of government focus.' No prior call exists for comparison, but management's emphasis signals this is now a key pillar.

Management admitted EBITDA margin decline due to ₹2 Cr equipment loss and depreciation impact. EBITDA growth of 11% YoY is far below revenue growth of 45.7%, indicating operational deleveraging, not strength.

Fabrication capacity at only 25% utilization (500 tons/month of 2000 tons capacity). Management framed this as demand-driven ('we are giving it 25%'), but low throughput limits operating leverage and suggests demand uncertainty.

43 acres in Purnea earmarked for industrial park (government subsidies available), 17 acres for housing (to be sold to customers). But 'nothing has been finalized for 43 acres yet'—monetization path and timeline uncertain.

Steel prices on uptrend, coking coal rising, no price drop expected near term. ₹2,500/ton price increases monthly. Demand strong due to infrastructure growth. Prices expected to continue rising.

66% of revenue through Tata Steel dealer retail; Tata fixes prices, we supply accordingly while maintaining warehouse margins. Project sales priced competitively by demand and scale. HR, CR, GP sheets follow Tata's structured pricing.

Goal to scale fabrication revenue up to 10% of total from PEB and railway segments. We are executing orders for Tata Steel, railway projects, expanding manufacturing. Revenue estimate: 10% material + without material we average to reach ₹200 crores. 65% steel material, 30-35% copper.

In fabrication, 10 to 12 rupees per kilo depending on product mix. If steel material, margin less. If more steel, margin less. Long vs flat: flat yields slightly better margins. Blended margins healthy. Will try to increase margin going forward. Not just distribution—we are build-to-ship, cut HR to customer size, offer solutions.

Tata Steel connected us for 25-30 years through dealer network. We give dealers gifts, trips, branding, support. Tata dealers rank us #2 in India after Chennai. We are the backbone. Distribution network is the strength. We have all product types, big volume, and first profit to dealers.

Long products have less margin, flat products more. Blended margins remain healthy. With fabrication, margin will improve. We are doing transportation services for customers as well. Margin will not decrease; it will increase.

Working capital limit ₹400 Cr minus AIV. Government loans ₹350 Cr included. 1,200 dealers get 6x credit multiple. 350 Cr avg booking, 3 months 45-day inventory, 45-day booking average. BBB rating upgraded to A minus from CRISIL this year.

Key business is distribution. Will start welding rod production (200-300 tons/month). Production of 300 tons/month. Railway work at Lucknow for BHEL 300 tons/month. Will also work for Iris Wire, Adani plant in Khargone. Thermal power plant demand high. Expect to reach 10% fabrication revenue by next year.

38% growth last year. Hope to see average 25% growth this year. Also 20% increase in profit from last year. Average growth 25% in revenue, PBT, PAT. Cannot say EBITDA growth yet, but rest will see growth.

Railway orders: contractors build entire bridge, steel fabrication done by us. Design approved by RDSO. No direct interaction with railway. Supply steel grade or buy it. Railway engineers inspect, certify, paint, assemble, check, deliver. 3 inspections. Total responsibility is ours. Not taking bridge orders yet; order is big contract and subcontracting.

Around 5 crore capex as we already have land parcel. If requirement, for machines. One more thing: in fabrication, whether for PEB or railway, 70-80% machines can be used on either side. In that case, machine used optimally on machine only.

Approximately within 2-3 years. Utilization 60-70%, within next 2-3-6 months we will reduce capacity, then capex in advance. Order book has delivery time. Main reason: in Indian contracts, delivery time is late. We give on-time or before-time delivery. Land parcel available. Investment in machines quickly.

43 acres total. Remaining 50 acres target to be acquired. Government funds available for industrial park. If opportunity exists, we can think of anything. Industrial plot and housing plot. 17 acres for housing, 49 acres in 5-6 acres will sell industrial plots. Out of 46 acres, 7 acres registered land. Industrial plot in Purnea—waiting for registration. Housing and industrial—two plans. Will sell and give details.

Cannot go into distribution, right? In fabrication, thinking if utilization completed here, then land in Calcutta. There is land registered already. 15 acres land. No final decision on what to do. If understand expansion, can put fabrication unit there.

How?

Lot of work done by government department. Lot of opportunity. Orders getting good. No shortage. No growth. This growth will be there going forward.

EBITDA margin declined. Because of machines we sold, EBITDA margin has declined. Rest before tax, after tax, it's good growth. Growth will be there going forward.

We will be in an increasing trend. There is a margin in fabrication and there is a margin in fabrication. For example, fixed cost 500 tons, fixed cost 2000 tons. In case of fabrication, we will be able to improve the margin. Fixed cost of purchasing from other people. Because direct from Tata Steel, raw material available not available to other party. Because they cannot purchase directly from Tata Steel. Either purchase from dealer or distributor. Edge there.

Vague phrasing ('average growth of 25%'). Delivered 45.7% YoY in Q2, so full-year 25% implies deceleration. No quarterly or H2-specific target.

Delivered PAT +48.1% in Q2, so 20% full-year profit growth implies deceleration and margin compression ahead.

Aspirational. Currently achieving 10-12 rupees per kilo (unquantified %). Depends on 60-70% capacity utilization, which is 2-3+ years away.

Land already owned in Purnea. Capex only for machinery. Timing: within 2-3 years, to be finalized once 60-70% utilization reached.

Fabrication business showing signs of execution challenges: ₹2 Cr loss on Uttarkhand equipment (bought, remained idle 6 months, sold at loss); current capacity utilization only 25%. Scaling to 60-70% by FY28 is unproven.

PAT margin collapsed to 1.4% (extreme for distribution). EBITDA growth (11%) far below revenue growth (45.7%), signaling operational deleveraging. QoQ PAT declined 0.4% despite revenue +20.1%, indicating cost pressures offsetting volume gains.

66% of revenue flows through Tata Steel dealer retail network. Pricing power is ceded to Tata; BMW is a pure volume player. Any shift in Tata's distribution strategy or pricing would directly impact profitability.

43 acres in Purnea earmarked for industrial park; 17 acres for housing. But 'nothing finalized for 43 acres yet.' Government subsidy approval, registration, and sales timeline all undefined. Real estate is a slow, capital-intensive path to value.

₹25.7 Cr railway RDSO-approved order book is material. Railway contractor payment cycles are notoriously long and subject to bureaucratic delays. Management acknowledged this risk but claims subcontracting shields them from direct interaction with railways.